Maximising investment performance in residential property: A Brisbane case study

1. Maximising investment performance in residential property: A Brisbane case study Professor Chris Eves QUT

2. Residential Home ownership in Australia • Residential rental property ownership • Public and social rental property

3. Australian Residential Rental Stock

4. Why Australians invest in residential Property • Long term capital gain • Something for the children • Taxation benefits (negative gearing) • Rental income • Possible future home • Capital gain • Unable to sell

5. Research Objectives • Assess the variation in income and total returns • Demonstrate the problems associated with Capital City median house price guides • Determine the impact of property location on rental income returns

6. Source: Living Australia 2009 Australian Capital cities: Average House Price and Capital return: 2007-2008

7. Brisbane Median House Prices: 2007 to 2009

8. Brisbane Residential Property Capital Returns

9. Capital Return Performance

10. Analysis 54 Brisbane Suburbs • Suburb location • Suburb value

11. Brisbane Geographic Locations: Median Price and Weekly rent

12. Price and Income Returns 2007 to 2009

13. South East Queensland: Brisbane Regional

14. Queensland Rural Locations

15. University Suburbs

16. Summary: Total returns: 2007-2009

17. Conclusions • A single measure of residential property performance based on capital city median house prices only provides an indication of actual residential return performance for that location. A suburb analysis is more informative for an investor considering residential property as an investment asset.

18. This study has confirmed that the rate of return for residential property is dependent on the actual location of the property and income return is not a factor of house price alone but the weekly rental.

19. Rental houses in lower value locations consistently outperform higher value areas in respect to total return. This is particularly the case in respect to residential property in regional or rural locations. However, these higher income returns are based on lower median prices and subsequently lower capital returns.

20. However, the study does show that in major urban areas, the total return from residential property in lower socio-economic value suburbs in Brisbane have outperformed all other Brisbane locations on an income and total return basis. This shows that residential property investment in lower socio-economic areas will provide the investor with a higher rate of return than residential property investment in higher value locations.

21. The study also shows that residential rental property close to a university will provide a higher income return than similar value suburbs not close to a university. • However, this higher return is based on the rental property being leased